India’s private sector economy loses momentum: Composite PMI

Mumbai, Oct 5 (IANS) India’s private sector economy lost some momentum in September due to softer increase in output and new business generation in both the manufacturing and service sectors, a key macro-economic data showed on Wednesday.

The seasonally adjusted Nikkei India Services Business Activity Index, too, registered a slower rate of expansion at 52 in September, down from August’s 43-month high of 54.7.

An index reading of above 50 indicates an overall increase in economic activity, and below 50 an overall decrease.

“Service sector performance in India continued to improve relatively modestly in September, a trend that has been evident throughout the year-to-date,” Pollyanna De Lima, economist at IHS Markit and author of the report, was quoted in a statement as saying.

“With manufacturing also on a softer footing, growth of private sector output and new orders eased in the latest month.”

De Lima pointed out that the PMI Composite Output Index posted its highest reading in Q2 of 2016-17 since the Jan-Mar 2015 quarter, thereby suggesting a pick-up in GDP (Gross Domestic Product) growth.

According to the report, the level of new business placed with Indian services firms increased moderately in September on the back of competitive pressures and unfavourable weather conditions. The upturn in order books at manufacturers also lost some momentum.

“The ongoing upturn in new work combined with muted employment growth led backlogs of work across the private sector to increase at the quickest pace in nearly two-and-a-half years,” De Lima said.

“As a result of this, businesses may be more willing to take on additional workers as we head to the year end.”

The data implied that higher backlogs was caused due to broadly stagnant staffing levels at services firms and manufacturers, a trend that has been evident throughout 2016 so far.

The data revealed that the prices charged by Indian service providers increased in September, although the rate of inflation accelerated slightly. Factory gate charges also increased at a quicker pace.

“Food and petrol prices continued to climb in September, which placed pressure on operating costs,” De Lima said.

“In response, private sector companies raised their own prices for the second straight month, although inflation remained relatively soft.”

The report added that business optimism among Indian service providers fell in September due to challenging market conditions.

The Nikkei India Composite PMI is a weighted average of the Manufacturing Output Index and the Services Business Activity Index, and is based on original survey data collected from a representative panel of around 800 companies.